The signs are pointing towards another shaky fall for the U.S. economy. These earnings numbers will not hold up, write that down. We are so far away from normal price to earnings ratios in the stock-market that it is just a matter of time. Historically the normal P/E is between 8-12, right now its more like 18 which is quite high for the amount of debt, global recession and multi-decade high unemployment numbers coming from the U.S.
The U.S. recession may not be coming to an end and there is a risk the economy may experience a “double-dip” contraction, said Martin Feldstein, a professor of economics at Harvard University.
I am glad that our private central bank’s Chairman has come to reality along with the rest of us. In my opinion, this is really the soft-depression we should of had after the dot-com bubble and 9/11. The reason is will be long lasting is because of the extent of the malinvestment that took place from 2001-2007.
Because of our real estate asset bubble, much of the economy (upto 35% by some estimates) reallocated resource to areas that were not sustainable and now that it has finally dawned on people that not everyone can be a banker or real estate agent, it will take time for jobs to be created in areas that will have long-term and sustainable.
Federal Reserve Chairman Ben S. Bernanke said the collapse of U.S. lending will probably cause “long-lasting” damage to home prices, household wealth and borrowers’ credit scores.
“One would be forgiven for concluding that the assumed benefits of financial innovation are not all they were cracked up to be,” the Fed chairman said today in a speech at the central bank’s community affairs conference in Washington. “The damage from this turn in the credit cycle — in terms of lost wealth, lost homes, and blemished credit histories — is likely to be long-lasting.”
I agree with their assessment. The more will bailout the bad actors in this situation the longer it will be until trust is restored in our markets and that is the single most important step in getting banks to restore a normal level of credit in our markets. Hopefully our representatives will realize this and do what is right. Criminal charges are in order as well, you don’t pull something of this scale without breaking some laws. There is no easy answer to this crisis but this is when we can shine and do the right thing.
The current global recession is likely to be unusually long and severe and the recovery sluggish since it sprang from a financial crisis, the International Monetary Fund said on Thursday.
The IMF called for aggressive and coordinated monetary and fiscal policies, and said restoring confidence in the financial sector was important for economic policies to work and for a recovery to take hold.
This is pretty bad news. By some definitions, a decline of 10% or more in national GDP is considered the signal of a country entering into a depression. I believe we will have a “soft depression” that would have a slow decline with a longer period of a harsher economic environment. It is not clear if that is the correct path to take if it is clear we are entering into a depression. This unprecedented amount of governmental intervention has soften the decline a little, but at the same time, we have more uncertainty and volatility.
Having a quick and severe decline in my opinion would be preferable even though we may have a short period of economic crisis. This would noticeable restore confidence in our markets by getting these bad debts to market and into the light. This is turn would allow us to start rebuilding our economy in a manner that is more productive with a long-term outlook to prevent from being so vulnerable to these cyclical crisis-es. The more we decide to intervene in this important market function, the longer it will take to sort this mess out and move on to even more important issues at hand.
The U.S. economy contracted at its sharpest rate since early 1982 in the fourth quarter, revised data showed on Friday, as exports plunged and consumers cut spending by the most in more than 28 years.
Well are we just waking up to this fact? I would also add that it should be the worst “depression” since the 1930s. We broke some important technical supports on the Dow Jones Index today so I believe we will here markets technicians declare we have officially entered into a “bear” market and we should see a sell-off that will bring us to the next support levels which I believe are below 7,000. Thanks Alan for allowing us to get into this environment by keeping interests so low after the tech bubble. We should taken our recession like a man and not the easy way out.
Former U.S. Federal Reserve Chairman Alan Greenspan said on Tuesday the current global recession will “surely be the longest and deepest” since the 1930s and more government rescue funds are needed to stabilize the U.S. financial system.
“To stabilize the American banking system and restore normal lending, additional TARP funds will be required,” Greenspan said in a speech to the Economic Club of New York. The U.S. Treasury’s Troubled Asset Relief Program designed to help bail out banks has been partially successful, he said.